Over the last five years, NTIA has measured household connectivity as a means of determining
which Americans are connected to the nation's telecommunications and information
infrastructure. Part I updates the earlier household penetration surveys released in NTIA's
Falling Through the Net: A Survey of the "Have Nots" in Rural and Urban America (July 1995)
and Falling Through the NetII: New Data on the Digital Divide (July 1998).(1)

As in our earlier
surveys, we have measured household telephone, computer, and Internet penetration rates across
America to determine which Americans own telephones and personal computers (PCs) and
access the Internet at home.(2)

The 1998 data reveal that, overall, U.S. households are significantly more connected by
telephone, computer, and the Internet since NTIA issued the first Falling Through the Net report,
which was based on 1994 Current Population Survey (CPS) results.(3)
(Chart I-1) Penetration
rates have risen across all demographic groups and geographic areas. Nevertheless, penetration
levels currently differ -- often substantially -- according to income, education level, race,
household type, and geography, among other demographic characteristics. The differences in
connectivity are most pronounced with respect to computers and Internet access.

The following examples highlight the breadth of the digital divide today:

Those with a college degree are more than eight times as likely to have a computer at
home, and nearly sixteen times as likely to have home Internet access, as those with an
elementary school education.

A high-income household in an urban area is more than twenty times as likely as a rural,
low-income household to have Internet access.

A child in a low-income White family is three times as likely to have Internet access as a
child in a comparable Black family, and four times as likely to have access as children in
a comparable Hispanic household.

A wealthy household of Asian/Pacific Islander descent is nearly thirteen times as likely to
own a computer as a poor Black household, and nearly thirty-four times as likely to have
Internet access.

Finally, a child in a dual-parent White household is nearly twice as likely to have Internet
access as a child in a White single-parent household, while a child in a dual-parent Black
family is almost four times as likely to have access as a child in a single-parent Black
household.

The data reveal that the digital divide -- the disparities in access to telephones, personal
computers (PCs), and the Internet across certain demographic groups -- still exists and, in many
cases, has widened significantly. The gap for computers and Internet access has generally grown
larger by categories of education, income, and race.

These are just a few of the many disparities that persist across the United States today. As
discussed below, however, the divide among households with telephones is narrowing. Some
gaps for computer ownership (between certain income and education levels) are also closing. As
the following discussion explains, Internet access remains the chief concern, as those already
with access to electronic resources make rapid gains while leaving other households behind.

The good news is that the differential between traditional "haves" and "have nots" has decreased
in recent years. For example, on average, no group is more likely to own a telephone today than
Black households earning $75,000 or more (traditionally less connected than White households
at the same income level).

1. Stable Telephone Penetration

As noted, the 1998 data reveal that telephone penetration rates among households have changed
little overall in the last few years. From 1994 to 1998, at-home telephone ownership in America
has increased slightly from 93.8% to 94.1%. (Chart I-2) All geographic locations -- whether
rural, urban, or central city -- have experienced a similar marginal growth, although central
cities have continued to lag behind rural and urban areas. Id.

2. Disparities in Telephone Penetration

The likelihood of owning a phone still varies significantly, however, by the household's income,
education level, race, age, or household makeup. Additionally, where a person lives can also
greatly influence the likelihood of telephone ownership. While rural areas are generally as
connected as urban areas, those groups that are less likely to own phones have especially low
penetration rates in rural areas.

The following demographic and geographic breakdowns are particularly important determinants
in household telephone penetration rates:

Income. Generally, telephone penetration correlates directly with income. Only 78.7% of the
lowest-income households (i.e., less than $5,000 annually) have telephones.
(Chart I-3) If you
are poor and living in a rural area, a household's chances are approximately three out of four of
owning a phone. At the opposite end of the spectrum, if a household earns more than $75,000
and is located in central city and urban areas, it is particularly likely (98.9%) to own phones. Id.

Approximately 95.0% of all
White households have phones, regardless of where they live.
(Chart I-4) This contrasts sharply
with minority households, particularly those such as rural-dwelling American
Indians/Eskimos/Aleuts (76.4%), Hispanics (84.6%), and Blacks (85.4%). Id.

The disparity based on race/origin is also affected by income level. At the highest income level
($75,000 or higher), there is virtually no difference among household penetration rates.
(Chart I-6) At the lowest income level (less than $15,000) the disparities are pronounced: American
Indians/Eskimos/Aleuts (72.3%), Blacks (78.1%), and Hispanics (81.9%) have the lowest
penetration rates, compared to Asians/Pacific Islanders (90.9%) and Whites (89.1%). Id.

Education. As with income, the degree of phone ownership closely correlates with the level of
education. For those with college degrees, the rate exceeds 97.0%.
(Chart I-7) At the other end,
those with only some high school education have the lowest penetration rates, particularly in
central city areas (85.0%). Id.

Household Type. Whether one is married or has children also affects the likelihood of having
telephone service. Married couples with children are particularly likely to have telephones
(96.4%). (Chart I-8) Single parents with children have the lowest phone rates in this category:
male-headed households in central cities (85.9%) fare worst, followed by female-headed
households in rural areas (86.8%). Id.

Age. Seniors remain the most connected of all age groups by telephone (95.6%), with 45-54
year-olds following closely behind (95.4%).
(Chart I-9) Households headed by those under 25
are the least connected (87.6%), with particularly low rates in rural (84.2%) and central city
(87.7%) areas. Id.

Region. Viewed in the aggregate, there is little disparity in telephone penetration by region. The
Northeast, Midwest, and West all have penetration rates of approximately 95.0%, although the
South lags at 92.4%. (Chart I-10) The differences come into play when one looks at the location
within a region. Rural areas in the Northeast (96.7%) and Midwest (96.0%) exhibit the highest
telephone ownership rates. At the lowest end are the central cities in the Midwest and South
(both 91.8%), followed by rural areas of the South (92.1%) and West (92.3%). Id.

State. State telephone penetration can be grouped by tiers
(Table I-1)(6) In the high tier,
Minnesota, North Dakota, Maryland, and others lead the way with rates of 96% or more. In the
middle tier lies the majority of states, ranging from Ohio (95.8%) to Florida (92.3%). The low
tier primarily contains southern states, with Oklahoma, Arkansas, and New Mexico exhibiting
rates below 90%. Id.

To conclude, over the past five years, the aggregate level has remained virtually unchanged.
However, closer inspection reveals that not all groups or regions have fared the same. If you are
low-income, a minority, less-educated, a single parent with children, a young head of the
household, or live in the South, then you are less likely to have a telephone at home. Households
that belong to one of these groups and are located in a rural area or a central city, are likely to be
among the least connected.

3. Closing Penetration Gaps

While there are still acute disparities among different demographic groups, the encouraging news
is that certain disparities appear to be shrinking over time. The racial divide, for example,
between Whites and Blacks, and Whites and Hispanics, has shrunk significantly between 1994
and 1998. In 1994, there was a 10.6 percentage point difference between telephone penetration
rates in White and Black households. By 1998, that gap decreased (by 25.5%) to a 7.9
percentage point difference. Similarly, the White/Hispanic differential of 10.2 points in 1994 has
decreased by 37.3% to a 6.4 percentage point gap in 1998.

Most of this closure has occurred just in the last year. In the period between 1997 and 1998, the
White/Black household gap decreased by 20.2% (from a difference of 9.9 percentage points in
1997 to a gap of 7.9 percentage points in 1998), and the White/Hispanic household gap
decreased by 31.9% (from a difference of 9.4 percentage points in 1997 to a gap of 6.4
percentage points in 1998). (Chart I-5)

The narrowing of the divide has not, however, occurred across all income levels or proceeded at
similar rates. During the period between 1994 and 1998, the White/Black divide decreased most
significantly for households at income brackets of less than $15,000: the racial divide shrunk by
37.5% (or 5.4 percentage points). The gap also shrunk by 8.5% (or .4 percentage points) for
households earning between $15,000-34,999. In contrast, the White/Black gap for the $35,000-74,999 bracket increased during 1994-98, widening by 0.9 points (a growth of 52.9%).

The most surprising change has been at the highest income level of $75,000 or more: for that
category, the phone penetration level for high-income Whites and Blacks is virtually the same
(99.7% for Blacks, compared to 98.8% for Whites) (Chart I-6) Race has ceased to be a factor at
the highest income level.

The White/Hispanic divide also varies by income level, but in all cases has declined between
1994 and 1998. For incomes less than $15,000, the gap between White and Hispanic households
narrowed by 4.9 percentage points (shrinking by 40.5%). For incomes between $15,000-34,999,
the divide closed by 2.1 percentage points (a change of 29.2%). Households earning incomes
between $35,000-74,999, or more than $75,000, both experienced a marginal narrowing of 0.3
percentage points (a change of 21.4% and 33.3%, respectively).

In sum, the traditional divide besetting groups of telephone users has narrowed in many instances
during the past several years. The gaps have been particularly reduced during 1997-98.

Internet access has also grown significantly in the last year: 26.2% of U.S. households now have
Internet access, up from 18.6% in 1997 (an increase of 40.9%).
(Chart I-1)(7)

As with computer
ownership, Internet access has increased for all demographic groups in all locations. In the last
year alone, for example, Internet access increased 40.5% for White
households, 45.4% for Black
households, and 44.8% for Hispanic households.
(Chart I-23)

2. Disparities In Access to Electronic Services

Despite these gains across American households, distinct disparities in access remain.
Americans living in rural areas are less likely to be connected by PCs or the Internet -- even
when holding income constant. (Charts
I-12,
I-21) Indeed, at most income brackets below
$35,000, those living in urban areas are at least 25% more likely to have Internet access than
those in rural areas. (Chart I-21) Additionally, groups that already have low penetration rates
(such as low-income, young, or certain minority households) are the least connected in rural
areas and central cities.

The following demographic and geographic breakdowns are significant determinants of a
household's likelihood of owning a computer or accessing the Internet from home:

Income. PC and Internet penetration rates both increase with higher income levels.(8) Households
at higher income levels are far more likely to own computers and access the Internet than those at
the lowest income levels. Those with an income over $75,000 are more than five times as likely
to have a computer at home (Chart I-12) and are more than seven times as likely to have home
Internet access (Chart I-21) as those with an income under $10,000.

Low income households in rural areas are the least connected, experiencing connectivity rates in
the single digits for both PCs and Internet access.
(Charts I-12,
I-21) The contrast between low
income households (earning between $5,000 and $9,999) in rural America and high income
households (earning more than $75,000) in urban areas is particularly acute: 8.1% versus 76.5%
for computer ownership (Chart I-12), and 2.9% versus 62.0% for Internet access.
(Chart I-21)

The impact of income on Internet access is evident even among families with the same race and
family structure. Among similarly-situated families (two parents, same race), a family earning
more than $35,000 is two to almost six times as likely to have Internet access as a family earning
less than $35,000. (Chart I-29) The most significant disparity is among Hispanic families: two-parent households earning more than $35,000 are nearly six times as likely to have Internet
access as those earning less than $35,000. Id.

Again, geography and income influence these trends. Urban Asians/Pacific Islanders have the
highest computer penetration rates (55.6%) and Internet access rates (36.5%).
Charts I-13,
I-22)
By contrast, rural Black households are the least connected group in terms of PC ownership
(17.9%) or Internet access (7.1%). Id. Black households earning less than $15,000 are also at
the opposite end of the spectrum from high income Asians/Pacific Islanders for PC ownership
(6.6% versus 85.0%). (Charts I-14,
I-24)

The role of race or ethnic origin is highlighted when looking at similarly-situated families. A
White, two-parent household earning less than $35,000 is nearly three times as likely to have
Internet access as a comparable Black household and nearly four times as likely to have Internet
access as Hispanic households in the same income category.(9)

Education. Access to information resources is closely tied to one's level of education.
Households at higher education levels are far more likely to own computers and access the
Internet than those at the lowest education levels. Those with a college degree or higher are
more than eight times as likely to have a computer at home (68.7% versus 7.9%) and are nearly
sixteen times as likely to have home Internet access (48.9% versus 3.1%) as those with an
elementary school education.
(Charts I-17,
I-25) In rural areas, the disparity is even greater.
Those with a college degree or higher are more than eleven times as likely to have a computer at
home (6.3% versus 69.7%) and are more than twenty-six times as likely to have home Internet
access (1.8% versus 47.0%) as those with an elementary school education. Id.

Household Type. As with telephones, the makeup of the household influences the likelihood of
the household's access to electronic services. Computer ownership lags among single-parent
households, especially female-headed households (31.7%), compared to married couples with
children (61.8%). (Chart I-18) The same is true for Internet access (15.0% for female-headed
households, 39.3% for dual-parent households).
(Chart I-26)

When holding race constant, it is clear that family composition can still have a significant impact
on Internet access. Overall, dual-parent White families are nearly twice as likely to have Internet
access as single-parent White households (44.9% versus 23.4%). Black families with two
parents are nearly four times as likely to have Internet access as single-parent Black households
(20.4% versus 5.6%). And, children of two-parent Hispanic homes are nearly twoand a half
times as likely to have Internet access as their single-parent counterparts (14.0% versus 6.0%).(10)

These differences are modified somewhat when income is taken into account. Nevertheless,
even when comparing households of similar incomes, disparities in Internet access persist. At all
income levels, Black, Asian, and Native American households with two parents, are twice as
likely to have Internet access as those with one parent. For Hispanics and White households with
two parents, on the other hand, clear-cut differences emerge only for incomes above $35,000.
For these households, Whites are one and a half times more likely and Hispanics are twice as
likely to have Internet access.(11)

Age. Age also plays a role in access to information resources. While seniors have the highest
penetration rates for telephones, they trail all other age groups with respect to computer
ownership (25.8%) and Internet access (14.6%).
(Charts I-19,
I-27) Young households (under
age 25) exhibit the second lowest penetration rates (32.3% for PCs, 20.5% for Internet access).
Id. Households in the middle-age brackets (35-55 years) lead all others in PC penetration (nearly
55.0%) and Internet access (over 34.0%). Id. The contrasts among age groups are particularly
striking between rural seniors (23.3% for PCs, 12.4% for Internet) and young, rural households
(27.7% for PCs, 13.3% for Internet) on the one hand, and urban 45-54 year-olds on the other
(55.3% for PCs, 36.5% for Internet). Id.

Region. The region where a household is located also impacts its access to electronic services.
The West is the clear-cut leader for both computer penetration (48.9%) and Internet access
(31.3%). (Charts I-20,
I-28) At the other end of the spectrum is the South at 38.0% for PC
penetration and 23.5% for Internet access. Id. Looking at the degree of urbanization, the lowest
rates are in Northeast central cities (30.4% for PCs, 18.7% for Internet access); the highest are in
the urban West (49.2% for PCs, 32.0% for Internet access). Id.

State. As with telephones, computer penetration among states is grouped according to tiers due
to the ranges of certainty created by the use of 90% confidence intervals
(Table I-2)(12) The top
tier ranges from Alaska's 62.4% to Wyoming's 46.1%. The middle grouping is bounded by
Arizona (44.3%) and Pennsylvania (39.3%). The low tier includes principally southern states,
ranging from Oklahoma (37.8%) to Mississippi (25.7%). Id. Regarding Internet access, the
ordering of the states -- ranging from Alaska (44.1%) to Mississippi (13.6%) -- tracks relatively
closely the PC rankings, but often with wider confidence intervals at the 90% level.
(Table I-3)

In sum, disparities with respect to electronic access clearly exist across various demographic and
geographic categories. Similar to telephone penetration, electronic access comes hardest for
Americans who are low-income, Black or Hispanic or Native American,(13) less educated, single-parent families (but especially single-female householders), young heads-of-households, and
who live in the South, rural areas or central cities. Dissimilar to the phone profile, however,
senior "have nots" are less connected in terms of electronic access. And Asians/Pacific Islanders
have reached a leading status with respect to computers and Internet access that they have not
enjoyed in telephone comparisons.

3. Expanding Digital Divide

The chief concern with respect to household computer and Internet access is the growing digital
divide. Groups that were already connected (e.g., higher-income, more educated, White and
Asian/Pacific Islander households) are now far more connected, while those with lower rates have
increased less quickly. As a result, the gap between the information "haves" and "have nots" is
growing over time. The increasing divides are particularly troublesome with regard to Internet
access.

a. Divide by Race/Origin

The digital divide has turned into a "racial ravine" when one looks at access among households of
different races and ethnic origins. With regard to computers, the gap between White and Black
households grew 39.2% (from a 16.8 percentage point difference to a 23.4 percentage point
difference) between 1994 and 1998. For White versus Hispanic households, the gap similarly rose
by 42.6% (from a 14.8 point gap to 21.1 point gap).
(Chart I-15)

Minorities are losing ground even faster with regard to Internet access. Between 1997 and 1998,
the gap between White and Black households increased by 37.7%
(from a 13.5 percentage point
difference to a 18.6 percentage point difference), and by 37.6%
(from a 12.5 percentage point
difference to a 17.2 percentage point difference) between White and Hispanic households.
(Chart I-23)

Even when holding income constant, there is still a yawning divide among different races and
origins. At the lowest income levels, the gap has widened considerably for computer ownership.(14)
For households earning less than $15,000, the gaps rose substantially: by 73.0% or an additional 4.6
points between White and Black households, and by 44.6% or an additional 2.5 points between
White and Hispanic households.
(Chart I-16a) For the households earning between $15,000 and
$34,999, the disparities between White and Black households has increased by 61.7% (or 5.0
percentage points), and 46.0% or (4.0 percentage points) between White and Hispanic households.
(Chart I-16b)

For the same period, the increases for the $35,000-$74,999 bracket are much smaller for both the
White/Black gap (a growth of 6.4%, or 1.0 percentage points) and the White/Hispanic divide (a
growth of 15.2%, or 1.5 percentage points).
(Chart I-16c) The most striking finding, however,
concerns the highest income level of $75,000 or more. For that income range, the gap between
White and Black households has declined substantially (by 76.2%, or 6.4 percentage points), while
the gap between White and Hispanic households has grown by 4.9 percentage points.
(Chart I-16d)

b. Divide Based on Education Level

Households at higher education levels are now also much more likely to own computers and access
the Internet than those at the lowest education levels. In the last year alone, the gap in computer use
has grown 7.8% (from a 56.4 to a 60.8 percentage point difference).
(Table I-4b) The divide with
respect to Internet access has widened 25.0% (from a 36.6 to a 45.8 percentage point difference).
(Table I-4d) Not all groups, however, are lagging further behind the front-runners. Those with some
college education, and those with a high school diploma, are now closing in on those with a college
education. Id.

c. Divide Based on Income

The digital divide has widened substantially when comparing households of different incomes. In
the last year, the divide between the highest and lowest income groups grew 29.0% (from a 42.0 to
a 52.2 percentage point difference) for Internet access.
(Table I-4c) The same trends are recurring
with respect to all income levels lower than $50,000. Interestingly, however, the gap appears to be
narrowing for the mid-range and upper income groups. Households earning between $50,000 -
$74,999 are now actually closer (by 0.4 percentage points) to those at the highest income level than
they were in 1997. Id.

Middle-income households are faring far better with regard to computers. A significant drop of
11.1% (from a 15.3 to a 13.6 percentage point difference) occurred between the highest ($75,000+)
and second highest ($50,000 - $74,999) income brackets.
(Table I-4a) And the gaps are also
narrowing -- though less significantly -- for those earning more than $25,000.

1.
Households were asked the same survey questions to permit easy comparison of penetration rates across the last
five years. The Trendline Study in the Appendix to this report provides a historic overview, comparing penetration
rates for certain categories since 1984. We have provided nearly identical tabulations and charts for these surveys.

2. Part II of this report expands on the earlier reports by examining Internet access at sources outside of the home, as
well as other Internet-related issues. A number of other studies have been developed on the subject of U.S.
households' electronic access to information. See, e.g., Susan Goslee (1998), LOSING GROUND BIT BY BIT:Low-Income Communities in the Information Age, Benton Foundation; Donna L. Hoffman & Thomas P. Novak,
"The Evolution of the Digital Divide: Examining the Relationship of Race to Internet Access and Usage Over
Time," a paper presented at the conference, "Understanding the Digital Economy: Data, Tools and Research," May
25-26, 1999 (forthcoming); Robert Kraut et al. (1996), "HomeNet: A Field Trial of Residential Internet Services,"
ACM Research; Shelley Morrisette et al. (1999), "Consumers' Digital Decade," Forrester Research, Inc.
<www.forrester.com>; U.S. Internet Council (1999), State of the Internet: USIC's Report on Use & Threats in 1999
<www.usinternetcouncil.org>; and Anthony Wilhelm (1998), Closing the Digital Divide: Enhancing Hispanic Participation in theInformation Age, The Tomas Rivera Policy Institute.

3. As discussed in the "Methodology" section, the Census Bureau collected CPS supplemental data on telephones,
computers, and Internet use by conducting interviews of 48,000 sample households (57,000 in 1994). Significant
advantages of the Census approach relative to others include its scientifically selected large sample and the
employment of home visits by interviewers rather than strict reliance on telephone surveys, thereby reaching
important households (e.g., those without telephones) that otherwise would likely be missed.

4. This study does not track ownership of cellular telephones or other wireless devices. If prices continue to decline
and these devices become substitutes for conventional wireline phones, then future household penetration studies
should include both types.

5. Throughout the text of this report, we will use the terms "Whites," "Blacks," "American Indians/Eskimos/Aleuts,"
and "Asians/Pacific Islanders" as short-hand references to the full race/ethnic origins categories of "White non
Hispanic," "Black non Hispanic," etc. There exists, of course, a separate "Hispanic" grouping. These categories
were created to avoid double-counting Hispanics that could otherwise be classified under any or all of the above
categories. A taxonomy with the full names appears in the charts that are part of this report, although American
Indians/Eskimos/Aleuts and Asians/Pacific Islanders are abbreviated there ("AIEA non Hispanic," "API non
Hispanic") to permit easy placement. In parts of the report and in some charts we reference "Other non Hispanic," a
Census race/origin category that includes Asians/Pacific Islanders, American Indians, Eskimos, and Aleuts. When
the collected sample for a given category is too small to permit a statistically significant finding (e.g., rural data for
AIEA or API Internet use), we may aggregate the data at the "Other" level to achieve the desired reliability.

6. Precise rankings cannot be assigned because in some cases, confidence intervals (i.e., positive or negative values
that identify the range within which it is 90% certain that the true penetration number falls) do not permit a stable
ranking system.

7. Because we have data on Internet access only for 1997 and 1998, a comparison before 1997 is not possible. As
explained in the Trendline Study, household Internet access was not measured until 1997. Prior to 1997, the Census
Bureau measured which households had "modems" in place. While modems provide a means to access the Internet,
they do not necessarily mean that a household actually has Internet access. This measurement therefore does not
provide an exact proxy for Internet access.

8.
PC-penetration and Internet access are closely correlated to income for all but the lowest income level (households
earning under $5,000). This income level shows slightly higher rates than the next income level ($5,000-$9,999),
which may be explained by the high number of students included in the lowest income category.

9. These calculations are derived from NTIA's own cross-tabulation of the Census data.